Strategic Energy Management
With rising fuel costs, the opening of electricity and gas markets and the introduction of new climate change policies, the requirement to monitor and reduce energy consumption is now greater than ever for business managers.
The process of managing energy is not new or complicated. Energy should be regarded as a business cost similar to other business costs including raw material and labor. The effort required to manage energy effectively will vary between companies and depends on the company size, and energy intensity (energy costs expressed as a percentage of total company costs) and the current level of efficiency. It is not unreasonable for a company starting out in energy management to achieve a 20% reduction in their energy bills by good housekeeping measures alone. This cost saving has a straight positive impact on the bottom line, yet is very often overlooked by firms who perceive energy management as not central to the business or not “strategic enough” to warrant management attention. However, as costs are rising and margins are being squeezed, introducing strategic energy management into a firm makes clear business sense and clearly should be a priority for management.
However, managing energy does not necessarily require a formal system; any firm can improve their energy performance by following a few simple techniques. As with any business strategy, strategic energy management incorporates a few fundamentals:
- Get senior management commitment
- Assess current situation
- Set goals and targets
- Establish an action plan
- Allocate resources
- Implement plan
- Review and evaluate
Companies that are already utilizing quality and/or environmental management systems such as ISO 9000 / 14001 or EMAS will undoubtedly find the implementation of a formal energy system familiar, as the method and management of the system should follow the structured ‘plan-do-check-act’ approach. Ideally, to provide an integrated approach to business sustainability, it is strongly recommended that energy management be incorporated into existing systems.
Energy strategy spans a number of the key functions within a firm and therefore requires cooperation and commitment from all. Senior management provide the leadership and set direction; finance are involved to ensure the most appropriate purchasing decisions are made; production, as the key user, ensures that energy is used appropriately; engineering ensure that plant is operated and maintained efficiently and HR are involved to facilitate training and help generate a culture of energy awareness.
The most successful energy management strategies typically involve the setting up of an energy management team with participants from each of the functions mentioned above. This team would support a dedicated energy manager with responsibility for the coordination of energy management activities. Depending on the size of the business, this may or may not be a full-time, dedicated post. The team in association with senior management would establish an energy management policy, which should include general aims and specific energy cost reduction targets, timetables and budgetary limits, the methods to be employed and the organisation of management resources. The energy manager should set up a system to collect, analyse and report on energy consumption and costs. This can consist of reading meters on a regular basis and the analysis of utility bills i.e. gas, fuel oil and electricity.
The next step is to assess how, when and why energy is used in the organisation through an energy review or audit. An energy audit establishes energy use patterns, the potential for energy and cost savings, and can include recommendations for actions for improving energy efficiency. The typical energy audit examines the use of the main utilities including electricity, gas, oil and water. This audit may be carried out internally if sufficient expertise is available in-house, but very often is carried out by independent, expert energy consultants. A typical, comprehensive energy audit may cost in the region of 1% of the total site energy bill but would, in many cases, identify cost savings opportunities greatly in excess of that — up to 20% as mentioned earlier.
Based on the findings and recommendations of the energy audit, a prioritized action plan should be drawn up. Energy and cost savings and the required investment will be listed for all items in the action plan. The projects should be implemented in order of priority as set out in the action plan.
The energy team should report results and progress to management and staff on a regular basis. An energy management plan or strategy will be more effective if its results are reviewed annually and the action plan revised. The review should at least detail actions undertaken during the year and projects and implementation plans for the next 12 months. Adjustments can be made to targets in light of business requirements e.g. a company may decide to make additional products that require a higher energy input.
So, the business of managing energy is just that — good business management. The same business practices employed by firms to gain and sustain competitive advantage are similar to the techniques employed by firms to maximise their energy efficiency. In the current climate of price uncertainly and increasing environmental obligations, the management of resources to provide increased profit margins and additional efficiency can only be of positive benefit to businesses.
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Andrew Parish is industry unit leader at Sustainable Energy Ireland, a Dublin-based nonprofit that promotes and assists the development of sustainable energy.
